The dynamics of globalization in the early modern world: new evidence from the Dutch-Asiatic trade, c. 1600-18001 Please do not cite. Preliminary figures and a work in progress. Pim de Zwart [email protected] Abstract This paper examines whether there is evidence of ‘hard globalization’ (i.e. price convergence) during the early modern period. New data on prices were assembled for the 16 most important products transported by the Dutch East India Company (VOC) between Europe and Asia in the seventeenth and eighteenth centuries. Of these commodities, the majority show price convergence, five show divergence and two products reveal no significant trend. While there was some scope for advances in transport, most of the explanation for price convergence (or the lack of it) was sought in the various commodity markets. Where commodities were traded between competitive markets, price convergence took place. In many of the purchasing markets, however, prices were not (only) determined by supply and demand, but were set by long-term contracts or influenced by the VOCs complete control over production and trade. This paper thus finds there are indications of global market integration in the early modern period. Mark-ups and trends were mostly determined by the extent to which the VOC controlled the purchasing markets in Asia. It is suggested that the consequences of this global trade, and its associated institutions, on various economies around the Indian Ocean should be further explored. 1. Introduction Between 1500 and 1800 intercontinental trade grew at 1.1 per cent annually.2 While this growth may not be remarkable by today’s standards, it was impressive compared with the development of world trade in the centuries before, as well as relative to the growth of other economic 1 I thank Gerrit Knaap and Judith Schooneveld-Oosterling for early access to Bookkeeper-General database, and Jan Luiten van Zanden for the data on VOC auctions in Amsterdam. Together with Oscar Gelderblom and Elise van Nederveen Meerkerk, Jan Luiten also gave some valuable suggestions, while Henk Looijesteijn pointed me towards some useful literature. The usual disclaimer applies. This paper will be the first chapter of my dissertation on Trade and Living Standards: The Dutch East India Company in the Indian Ocean, c. 1600-1800. 2 De Vries, ‘Connecting Europe’, p. 96. 1 indicators.3 Did the ‘Voyages of Discovery’ thus usher in a first age of globalization? In a series of papers and books published between 2000 and 2009, Kevin O’Rourke, Jeffrey Williamson and co-authors addressed the issue.4 They define globalization as the integration of markets across space, and commodity markets reflect one important dimension of this. The best evidence of commodity market integration is ‘the extent to which prices of the same commodities converge over time worldwide.’5 Since they do not find evidence of commodity price convergence before the 19th century, they conclude that no market integration took place during the early modern period. Instead, the 1820s should be seen as the starting point of globalization, as after that date technological innovations and declining trade barriers led to a decline in transaction costs and the integration of global commodity markets. Their work has become very influential and the nineteenth century is now generally referred to as the ‘first era of globalization’. Not everyone is convinced, however. Klas Rönnbäck found signs of global price convergence already from the late seventeenth century onwards.6 A study by Paul Sharpe and Jacob Weisdorf finds some degree of long-term market integration in the wheat trade between the US and the UK from the eighteenth century. They stress, however, that this is not evidence of globalization per se.7 Dennis O. Flynn and Arturo Giráldez have suggested that globalization started in 1571 with the foundation of Manila and the direct trade between the Americas and Asia.8 While they raise serious doubts regarding the narrow definition employed by O’Rourke and Williamson, they also join the same game when they find several ‘cycles’ in which the price of silver converged globally. In his review of the debate, Jan de Vries also raises some serious objections against O’Rourke and Williamson’s theses, which will be dealt with throughout the paper. In the end, he takes up a nuanced view suggesting that globalization in this period faced distinct limits, but that it was an era of globalization nonetheless.9 3 Findlay and O’Rourke, Power and plenty, p. 305. 4 O’Rourke and Williamson, ‘When did globalisation?’; ibid: ‘After Columbus’, ibid: ‘Did Vasco da Gama’, ibid. ‘Once More’ ibid: ‘From Malthus to Ohlin’; Findlay and O’Rourke, ‘Commodity market integration’; Findlay and O’Rourke, Power and plenty. 5 O’Rourke and Williamson, ‘Once More, p. 109. 6 Rönnbäck, ‘Integration’. 7 Sharp and Weisdorf, ‘Globalization revisited’. 8 Flynn and Giraldez, ‘Born with a “Silver Spoon”’, ibid., ‘Cycles of Silver’; ibid., ‘Path dependence’; ibid., ‘Born again’. 9 De Vries, ‘The Limits’, p. 731. 2 While Rönnbäck as well as Sharpe and Weisdorf have demonstrated evidence of transatlantic commodity market integration already during the eighteenth century, De Vries reasonably notes that because the institutions in the New World were specifically moulded to serve the interests of export and long distance trade ‘the real test of early modern globalization, by any definition, requires a study of Eurasia.’10 In this paper, the issue will therefore be taken up once more, employing new data from the Dutch-Asiatic trade. The focus of this paper is further narrowed as it only investigates the Dutch-Asiatic trade between roughly 1600 and 1800. This is not to claim that this is the only important trade in this period. While substantial work has already been done by K. N. Chaudhuri,11 further research is currently being undertaken regarding the Anglo-Asian trade.12 The collection of more evidence from the Portuguese Carreira da India or the French Compagnie des Indes and other companies could certainly lead to important insights. There are, however, good reasons to study the Dutch trade with Asia, as the VOC was by far the most important trading company in the Euro-Asian trade between 1600 and 1800: 49 per cent of all ships sailing to Asia in the seventeenth and eighteenth century were Dutch. In the second part of the eighteenth century the English and French were catching up, but it lasted until the 1780s before they were able to exceed the Dutch in numbers of Asia-bound ships. At the same time, the average tonnage of goods was also continuously higher on Dutch ships.13 TABLE 1: NUMBERS (AND SHARES) OF SHIPS SENT TO ASIA, 1600-1800. 1600-1700 1700-1800 Total 1600-1800 N % N % N % Dutch 1770 59 2950 44 4720 49 English 811 27 1865 28 2676 28 French 155 5 1300 20 1455 15 Portuguese 193 6 193 3 386 4 Danish 54 2 234 4 288 3 10 De Vries, ‘The limits’, pp. 715-6. Rönnbäck also showed data on the Euro-Asian trade, but focussed on the Atlantic. 11 Chaudhuri, The Trading World; ibid., The English East India Company. 12 Noques-Marco, ‘Euro-Asian globalization’. 13 De Vries, ‘Connecting Europe’, pp. 46-51. 3 Swedish 61 1 61 1 Ostend 55 1 55 1 Total 2983 100 6658 100 9641 100 Source: Gaastra and Bruijn, ‘The Dutch East India Company’s Shipping’. Despite the impressive amount of research that has been done on the VOC,14 as well as on price history in the Netherlands,15 the data from the Dutch-Asiatic trade that have been brought to bear on the issue of globalization have been meagre: decadal average prices for only 3 products: cloves, coffee and pepper.16 While pepper and cloves were certainly of great importance to the VOC in the early seventeenth century, by the 1660s they had already been surpassed by textiles in terms of total invoice value of return cargos.17 The importance of coffee did increase over the eighteenth century but the rise of a global market for coffee in the eighteenth century is still subject to debate.18 In this paper, I will put forward new annual price data on a greater variety of goods traded by the Dutch in the sixteenth and seventeenth centuries. The question of ‘when did globalization begin?’ is not really addressed as the search for one starting date would require an even larger time frame. Instead it analyses whether there is evidence of globalization taking place between 1600 and 1800 and examines what drove these trends, thus viewing globalization as a process rather than an event. In the next section a brief discussion of definitions is followed by methodological considerations and an introduction to the sources. Section 3 discusses the price differentials between Europe and Asia, while section 4 attempts to explain these developments via (a) the possibilities of a reduction in transport costs and (b) the extent to which the VOC controlled the purchasing markets in Asia. Section 5 discusses the possible effects of this ‘globalization’ for the European and Asian economies and concludes. 14 E.g. Gaastra & Bruijn, Dutch Asiatic Shipping, Glamann, Dutch Asiatic Trade, Jacobs, Merchant in Asia. 15 Posthumus, Nederlandsche Prijsgeschiedenis. 16 O’Rourke and Williamson, ‘When did globalisation begin?’; Rönnbäck, ‘Integration’. 17 Prakash, European commercial enterprise, p. 115. 18 Bulbeck et al., Southeast Asian exports, p. 169; McCants, ‘Poor consumers’; Topik, ‘The integration’; Rönnbäck, ‘Integration’. 4 2. Definitions, methodology and sources ‘Globalization’ is a widely used term, especially since the 1990s. As a result, numerous definitions have been given. I will focus on the discussion within the field of economic history.